One of California's largest for-profit college companies, Corinthian Colleges, lied to students and investors about its graduates' success in the job market -- the key selling point for such trade schools -- and intentionally recruited vulnerable students, according to a searing lawsuit filed Thursday by Attorney General Kamala Harris.

Two of Corinthian's schools -- Everest College campuses in Hayward and San Francisco -- went so far as to pay a temporary agency to hire graduates for two days to boost job placement numbers, the suit alleges. Others double-counted gainfully employed grads or fabricated them altogether, it says. Company executives exchanged concerned emails about these problems but continued to hide them, touting inflated job placement numbers to investors, according to the suit.

"The predatory scheme devised by executives at Corinthian Colleges, Inc. is unconscionable. Designed to rake in profits and mislead investors, they targeted some of our state's most particularly vulnerable people -- including low-income, single mothers and veterans returning from combat," Harris said in a prepared statement.

Corinthian responded in a statement that it was proud of the education at its colleges and that it has "robust processes in place to correctly record and disclose the job placement information we receive from our graduates and their employers.

"We will vigorously defend against this complaint," it said.

Advertisement

The state crackdown comes just a month after a Bay Area News Group analysis of the for-profit college sector revealed that former students at for-profit schools accounted for nearly half of all federal loan defaults in the Bay Area -- but just one-tenth of the area's college students.

The suit asks the court to force Corinthian to give up all its profits and to repay investors.

The Orange County-based company owns WyoTech, Heald and Everest, which have more than 14,000 students at nine Bay Area campuses and 27,000 students in 24 colleges statewide. Like others in the for-profit college sector, Corinthian's trade schools typically cost students tens of thousands of dollars a year, have low graduation rates and rely heavily on taxpayer-funded federal student loans and grants.

Through aggressive marketing campaigns Corinthian "is selling these expensive programs to students throughout California, many of whom head single-parent families and have annual incomes that are near the poverty line," the lawsuit contends.

What's more, it says, the Department of Justice discovered internal documents in which Corinthian describes its target demographic as "isolated," "impatient" individuals with "low self-esteem" who have "few people in their lives who care about them" and who are "stuck" and "unable to see and plan well for the future."

Ten years after graduating from Heald College in Hayward with an associate degree in business administration, Vada Pinson is still paying off $30,000 in loans. Years ago, after losing his job, he defaulted on his loans, an experience he still shudders to think about.

"You would not believe how they will come after you," he said about the collection agency.

The Oakland resident said he hopes the lawsuit will prevent colleges from giving other students false hope; despite promises of help finding work, he said, Heald didn't call him once with a job referral. He said his associate degree didn't help him find a job, either.

"They should be telling these people the truth," Pinson said.

Attorneys general in six states and the U.S. Securities and Exchange Commission are investigating Corinthian, according to SEC filings that do not specify reasons for the probes.

One advocate for students said she noticed a striking similarity between cases against other for-profit trade schools and a 2007 fraud case filed by then-Attorney General Jerry Brown that Corinthian settled for $4.3 million. The federal government can require more consistent and accurate reporting of job placements as it negotiates rules that could tie federal funding to the performance of vocational programs, said Pauline Abernathy, vice president of The Institute for College Access and Success, based in Oakland.

The attorney general's lawsuit "really makes clear why stronger action needs to be taken at the federal and state level to prevent these kinds of problems from occurring in the first place," she said.